Feinberg to Order 50% Cuts in Compensation for Bailed-Out Firms
2009-10-21 19:50:08.806 GMT

By Ian Katz, Julianna Goldman and Robert Schmidt
Oct. 21 (Bloomberg) -- Executives at seven bailed-out
companies including Citigroup Inc. and Bank of America Corp.
will have their pay cut about 50 percent after negotiations with
Kenneth R. Feinberg, the Treasury Department’s special master on
compensation, two people familiar with the matter said.
Cash salaries for the 25 highest-paid employees will be
slashed 90 percent under Feinberg’s plan, which will be
announced this week, one of the people said today on condition
of anonymity. Employees at the derivatives unit of American
International Group Inc., blamed for insurer’s near-collapse
last year, can receive no more than $200,000 in total pay, one
of the people said.
Feinberg, 63, who was special master of the September 11th
Victim Compensation Fund, was named to the Obama administration
pay position in June. Executive compensation came under scrutiny
after companies got billions of dollars in federal aid last year
amid the worst financial crisis since the Great Depression.
Public outrage flared in March after New York-based AIG paid
$165 million in bonuses to employees of the derivatives unit.
All perks such as limousine service and private aircraft
valued at more than $25,000 must be approved by Feinberg, one of
the people said.
Feinberg’s report will urge AIG executives who pledged to
return their bonuses to honor that commitment, one of the people
familiar with the matter said today.
Bank of America Chief Executive Officer Kenneth Lewis, at
Feinberg’s urging, agreed last week to give up his 2009 salary
and bonus. Citigroup on Oct. 9 agreed to sell its Phibro LLC
energy-trading unit to avoid a potential showdown with Feinberg
over a $100 million pay package for Andrew Hall, the unit’s CEO.
Feinberg, in a speech yesterday in Washington, said he is
“working daily” with the companies to reach agreement on their
pay packages. “The result speaks for itself,” he said when
asked about negotiations with New York-based Citigroup over
Hall’s pay.
In addition to pay compensation at AIG, Citigroup and Bank
of America, Feinberg oversees executive pay at Chrysler Group
LLC, Chrysler Financial Corp., General Motors Co. and GMAC Inc.

I'd like to hear what the Board of Directors are thinking on this...

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3H8.VP_CHsQ

The Board of Directors has no choice but to abide with what the regulators say.

The old days are over, no matter what bankers "want."

This will be a new function of whatever takes the place of the current regulatory structure. No more huge bonuses for huge risks. Not even Goldman.

Whoah... they're really getting at the neccessities...

"All perks such as limousine service and private aircraft valued at more than $25,000 must be approved by Feinberg, one of the people said. "

"This will be a new function of whatever takes the place of the current regulatory structure. No more huge bonuses for huge risks. Not even Goldman."

Do you live in a cave? Goldman already paid back their TARP money. They are exempt from government restrictions and can do whatever the heck they want to.

Do you live in a cave? Goldman already paid back their TARP money. They are exempt from government restrictions and can do whatever the heck they want to.

Ha.. Goldman is still benefiting...

I like this quote from Jeffrey A. Sonnenfeld of the Yale School of Management:

"These are people who want to be rewarded as if they were entrepreneurs. But they aren’t. They didn’t have anything at risk."

Well, except for taxpayer dollars and debt on future generations.

Too big to fail = Your business is our business, not just when you take a loss.

So are you.

I just don't understand why the morons like to incessantly complain about Goldman. Worst quarter, they lost $2B, and they were profitable for the whole year. They took TARP money because they were forced to: Fed didn't want people to know which banks needed it, so they made everyone take it (yeah, as if no one knew). The biggest benefit they received is expeditedly converting into a bank holding company to gain access to the Fed window, which they are allowed to do. They got the FDIC guarantees and got paid on what AIG owed them, but that was hedged with other banks. Sure, if AIG went under there'd be no other banks, but how exactly did Goldman get any benefit beyond the additional banks.

Meanwhile, the taxpayer has really bailed out and will lose money on Citi, BofA, AIG, Freddie, Fannie, etc. Probably a couple hundred billion, all told. Yeah, Goldman bought crap mortgages on one side and sold them on the other to the aforementioned idiots. But if the idiots would've stopped buying, Goldman would've stopped buying as well. If you're in the market and Goldman is on the other side selling you something, you should be thinking twice.

If Goldman employees don't get the money, shareholders will. Fine by me.

not about the tarp--its about being able to borrow huge amounts of money for basically nothing based on FDIC guarantee, an ongoing program---and then lend (leveraged) at ludicrously hi rates, especially those that extend out to the consumer (see the 29% rates charged by citi on cc bals)--allowed banks to bid up (leveraged again) the crap that they still carry on books at prices way in excess of current tradeable market values---taxpayer dollars at work to prop up values of overvalued instruments---prolongs the systemic illness but allows the too big to fails to make gobs of money--astounding and nauseating
hate links and this isnt completely on post point, but compelling and does connect a bit

http://blogs.reuters.com/rolfe-winkler/files/2009/10/einhorn-vic-2009-speech.pdf

I'm wondering how this will affect bonus compensation at firms who did not take TARP money.

e.g. foreign banks operating in the US (like UBS, CreditSuisse, Barclays, etc.)

Will they figure that they can cut pay, too, b/c if people don't like it and leave, there will be a lot of Feinberg refugees to hire away from Citi & BofA?